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Long Term Care Insurance

October 12th, 2014 at 09:10 pm

Long Term Care Insurance

My big financial accomplishment for the year (part of my getting organized goal) has been to enroll in a long-term care insurance policy. This was something that took a couple of months to accomplish.

I started with research, first on the internet, and then reading a couple of books. Then I went to einsurance and asked to contact brokers for these policies. No sooner had I pressed "return" on my request than my phone rang!

I ended up getting estimates from half a dozen different brokers, and sitting through join.me sessions with three of them. This was worth the time for me since I learned something different from each new broker.

The most important factor in my decision was choosing the company. You want a company that is highly rated by the various raters (Moody's, S&P, AM Best, & Fitch), since you won't be using the policy for a decade or two or three. Then I learned about the difference between "mutual" insurance companies and the others: "Mutual" companies are owned by their shareholders (like credit unions) and thus have much less of a history of rate increases. So I ended up going with Mass Mutual. Once I had made that decision, I have a friend locally who works for them, so I decided to give her my business rather than one of the on-line brokers, even though some of those were quite helpful.

Having chosen a company, I then had to decide the daily benefit rate, the term that the policy would cover me for, and the inflation rider. Some companies have other options that you can pay riders for as well, for example, having a monthly rather than daily benefit, which gives you a little more flexibility in your spending if you use the policy. I ended up choosing a $250 daily benefit, a two-year term, and a 3% rider. The first two of those were based on average cost/use statistics for non-Alzheimers patients (people with Alzheimers tend to be in facilities longer, but there is no history of this in my family) as well as knowing the terminal health histories of my parents and grandparents. The 3% rider was based on cost--it ended up costing me just slightly more than 50% of the total premium! Back when my mother bought her policy in the early 1990s, 5% riders were affordable, but these days, they cost signficantly more than the cost of the policy itself.

While from a personal perspective (since I am currently unemployed), this was not an optimal time to buy a policy, buying one now made sense to me for a number of reasons: the older one gets, the worse one's health tends to be and the harder it can be to get a policy, so I might as well get one while I am relatively healthy; also, for each year one waits, the cost increases 3-4% based on your age. Also, this is a time of turmoil and change in the industry: several former key players such as Prudential have pulled out (they service their current policyholders but will not sell new policies), and most of the companies are changing from equal rates for men and women to a gender-segregated system, where it costs significantly more for women to buy policies than men because women use more of the care. I had the time to do the research now, and while I don't have the money from my current earnings, I do have an inherited IRA with a required minimum distribution that is more than the policy cost, and I think that my mother would approve of my using the money for this purpose.

Also, since I currently pay for my own health insurance and have a mortgage, I itemize on my taxes and have recently been able to take a deduction for medical expenses. This expense will count towards that as long as my income is still relatively low. Once I earn more and if I ever again have employer-provided insurance, I probably won't be able to deduct this, but at least then I'll be in better financial circumstances overall.

In recent years, I've seen my mother and several friends/acquaintences as well as clients end up in assisted living facilities or with home health care workers, and this has probably made me more attuned to this issue than most people my age (54).

At any rate, another item on my "getting organized list" taken care of. I also found a friend to be my durable power of attorney for healthcare, and before years' end, I hope to get the POAs for health and medical as well as a will set up.

1 Responses to “Long Term Care Insurance”

  1. Wink Says:

    Thank you for posting this, it was really informative and helpful. I am the same age and have just started the information gathering process. It feels overwhelming. I hope to have something in place in the next few months.

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